AdAlta Limited

1AD Details

Q3FY21 Update: AdAlta Limited (ASX: 1AD) is a clinical drug biotechnology company using its i-body platform to develop next-generation protein therapeutics to treat a range of human disease. During the quarter, the company has reported a decline in operating cash inflow to $0.11 million, down from $0.45 million in the prior quarter. The company's cash position was $6.05 million as of 31 March 2021, a decrease from $8.06 million at the end of the previous quarter. During the quarter, the company has recorded an operating cash outflow of $2.13 million in Q3FY21 million compared to $3.53 million in Q2FY21. AdAlta keeps track of internal and external (collaborator) assets which might accelerate the growth trajectory in FY21. Moreover, the company has announced that FDA has granted Orphan Drug Designation to AD-214 in IPF during the period.

Result Performance (Half-Year Ended 31 December 2020): Revenues of the company from ordinary activities for the period stood at $806,501, an increase of 99.5% on previous corresponding period (pcp). Loss of the company from ordinary activities after tax attributable to the owners of AdAlta Limited, stood at $4,510,576, an increase of 24.9% on pcp. Net tangible assets per ordinary security for the period stood at 3.0 cents per share, as compared to 2.1 cents per share. The Board of Directors declared no dividends for the period.

H1FY21 Results Highlights (Source: Company Reports)

Outlook: The company is looking forward to expanding the pipeline initiatives. It has collaborated with GEHC to discover i-body candidates, who are expected to undertake responsibility for pre-clinical and clinical development in Q4FY21. It is further planning to add three additional assets in its pipeline in the calendar year 2021.

Key Risks: Due to the lockdown restriction, there was a delay in the programs and temporary closures in laboratories of the company, which may impact its operations. The company has several contracts globally due to which it is also exposed to foreign currency risk.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company’s cash cycle for H1FY21 stood at 413.2 days better than the cash cycle in H1FY20 at 848.0 days implying that the company managed its asset-liability balances in an efficient manner. The stock is currently trading below the average 52-weeks’ price level of $0.079 and $0.265. We have valued the stock using EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). We believe that the company can trade at some premium to its peer median EV/Sales (NTM trading multiple), considering top line and improved liquidity. For the purpose, we have taken peers like TBG Diagnostics Ltd (ASX: TDL), Telix Pharmaceuticals Ltd (ASX: TLX), etc. Considering the company’s trading level, rising top line, valuation and associated key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.155 as on 11 June 2021.

1AD Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined:  

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.